Form 04-611 Instructions - Corporation Net Income Tax Return - Alaska Department Of Revenue Page 4
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8The 20% U.S. factor threshold must be
of centralized departments that perform the normal
The water’s edge group for each taxpayer
within
the
consolidated
group
is
determined on a company-by-company basis
functions that a truly independent business would
and, unlike the apportionment factor, includes
perform for itself, such as accounting, personnel,
determined by reference to the individual
intercompany transactions.
insurance,
legal,
purchasing,
advertising
or
taxpayer.
Taxpayers
joining
in
a
financing; or (b) centralized executive officers who
consolidated return usually have a common
A corporation with taxable nexus in Alaska,
are
involved
in
planning,
operations
or
water’s
edge
group.
However,
but which does not have 20% or greater
coordination.
consolidated taxpayers may have distinct
average U.S. factors, must file a return using
Separate combined
combined groups.
the water’s edge method of reporting in which
ALLOCATION AND APPORTIONMENT
reports are required for each unique
it is combined with all members of the unitary
OF INCOME
water’s
edge
combined
group
group with 20% or greater U.S. factors.
A taxpayer with business income attributable to
represented in the consolidated return.
However, that taxpayer is not included in the
sources within and outside Alaska must apportion
Unique water’s edge groups will exist for
water’s edge combined group of any affiliated
such income. To calculate the apportionment
each distinct unitary business represented
taxpayers because its average U.S. factors are
percentage, use Schedule I - Apportionment Factor.
in the consolidated return. Unique water’s
less than 20%.
edge groups may also exist within a single
Apportionment refers to the division of business
unitary group where one taxpayer has less
UNITARY GROUP OR UNITARY
income
among
states
by
the
use
of
an
than 20% average U.S. factors and is
BUSINESS
apportionment formula.
excluded from the water’s edge group of
A business is unitary if the entities involved
every other taxpayer within that unitary
are under common direction (formal or
Allocation refers to the assignment of non-business
group.
informal) and activities within and without the
income to a particular state.
state are contributory and complementary in
COMBINED AFFILIATES
nature, such that profits of the group are
HAVING DIFFERENT
Alaska applies both the transactional and functional
inextricably
related.
Tests
of
unitary
tests of business income. Income resulting from
ACCOUNTING PERIODS
determination include functional integration,
The income of all affiliates included in a
transactions or activities that are within the regular
centralized management, and economies of
combined report must be determined on the
course of the taxpayer’s trade or business are
scale.
basis of the same accounting period.
business income.
Income from tangible or
Generally, the accounting period used in
intangible property is business income, if the
Determination
of
whether
the
activities
the return should be that of the common
acquisition, management, and disposition of the
constitute a unitary trade or business depends
parent. Where no common parent exists,
property constitute integral parts of the taxpayer’s
on the facts of each case.
The following
regular trade or business. Income meeting either
the income of the combined affiliates
factors are considered to be indications of a
should be determined on the basis of the
the functional or the transactional test is business
unitary trade or business, and the presence of
taxpayer's annual accounting period.
income. Income from transactions or activity that is
any of these factors creates a presumption that
unusual or infrequent is not non-business income
the activities constitute a single trade or
Generally, when it is necessary to convert
solely because of the unusual or infrequent nature
business.
an affiliate to the annual accounting period
of the income, activity, or transaction.
of the taxpayer, an interim closing of the
1.
Same type of business. Corporations are
books should be made for the members
Non-business income is all income other than
whose accounting period differs from the
generally engaged in a unitary trade or
business income.
business when the activities are in the same
common parent and/or taxpayer.
If no
general line of business.
For example,
substantial misstatement of income results,
PREPARING A CONSOLIDATED
a pro-rata conversion may be used.
corporations that operate a chain of retail
RETURN
grocery stores are almost always engaged in a
Two or more Alaska taxpayers in the same affiliated
unitary business.
group may elect to, or be required to, file a
III. OTHER GENERAL
INSTRUCTIONS
consolidated Alaska return (see “FILING A
2.
Steps in a vertical process. Corporations
CONSOLIDATED RETURN” on page 3). The
are engaged in a unitary trade or business
RETURN DUE DATE
Alaska Department of Revenue offers Alaska’s
The Alaska return must be filed within
when engaged in different steps in a vertically
Guide to Returns Based on a Combined
thirty (30) days of the date on which the
structured
enterprise.
For
example,
Report. The guide includes examples of filing a
corporation’s federal income tax return is
corporations that explore for and mine copper
consolidated Alaska return for taxpayers using the
required to be filed. Thus, the due date is
ores, concentrate, smelt and refine the copper
combined method of reporting.
not necessarily the 15th day of the month
ores, and fabricate the refined copper into
following the federal due date.
consumer products are engaged in a unitary
Alaska consolidated returns resemble, but do not
mirror, the federal consolidated return.
In an
trade or business regardless of the fact that the
EXTENSION OF TIME TO FILE
various steps in the process are operated
Alaska consolidated return the federal consolidation
substantially independently of each other and
rules are applied very narrowly to construct the
A federal extension automatically extends
the Alaska filing due date to thirty (30)
with only general supervision from the
Alaska consolidated items; namely capital gain net
days after the federal extended due date.
executive offices.
income, charitable contributions, the dividends
received deduction, income tax, credits, and other
AS 43.20.030(a). Be sure to attach a copy
of your federal extension to your Alaska
Strong
centralized
management.
taxes. The federal consolidated return rules do not
3.
govern the building of combined income.
Each
return. An extension of time to file is not
Corporations
that
might
otherwise
be
considered as engaged in more than one trade
taxpayer is required to determine its taxable income
an extension of time to pay.
using the water’s edge combined method of
or business are engaged in one unitary trade or
business when there is strong centralized
reporting. The taxable incomes of each taxpayer are
PAYMENT DUE DATE
then consolidated to comprise the consolidated
Full payment of the Alaska tax must be
management.
Some indications of strong
made on or before the 15th day of the third
centralized management are: (a) the existence
Alaska return.
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